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Microsoft has agreed to buy Nokia’s mobile phone business for 5.4 billion Euros (£4.6 billion) to support its growing mobile business.

Microsoft have announced that ‘the transaction is expected to close in the first quarter of 2014’ and will see around 32,000 Nokia employees transfer to Microsoft as part of the buy-out.

The announcement was received well by Nokia’s shareholders with the company’s share price increasing 35%. Meanwhile, Microsoft’s fell by over 5%.

The purchase comes at what could be seen as an appropriate time for both businesses; Nokia’s once-dominant position in the mobile market has been lost to Samsung and Apple and the company has continued to struggle with both innovation and market position over the past few years, while Microsoft has seen it’s Windows Mobile platform increasing in popularity despite being criticized by some for being too slow to enter the mobile market.

Additionally, Nokia’s flagship ‘Lumia’ handset is one of the most popular phones on the market to run Windows Mobile (receiving good reviews from some Nomis customers) – a factor that may also have influenced the decision.

Playing catch-up

Following August’s announcement that Windows overtook Blackberry in global phone sales for the first time, this news is further indication of Microsoft’s intent in the mobile marketplace, as the company seeks to compete with industry leaders Google and Apple.

It’s likely that Microsoft’s first aim in will be to increase global sales of Nokia-Windows smartphones, closing the gap to said industry leaders and securing third place ahead of BlackBerry for consecutive quarters.

From this position, Microsoft can begin to challenge Samsung, Google and Apple for the top-spot in both handset and OS sales. This is no small feat as their customers are traditionally sticky, but this purchase shows that Microsoft’s commitment to the mobile market is only beginning.

Read the full Windows announcement.

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